Banking Crisis Management in the EU: An Early Assessment

Jean Pisani-Ferry, Andre Sapir and Cedric Tille

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: For well over a decade many observers had warned that the European Unionwas ill-prepared in case of a financial storm because its market integration faroutpaced its policy integration. This situation was well known to policy-makersbut it was hoped that financial crises would wait until policy integrationoccurred. The reality turned out differently, however. We assess the managementof the 2007-2009 banking crisis within the EU against this backdrop. In anutshell, we find that Europe has done better than could have been expected onthe basis of existing arrangements. The two federal institutions acted swiftly,the European Central Bank by providing ample liquidity and the EuropeanCommission by enforcing competition discipline flexibly. However, there was noinstitutional innovation in the form of an EU-financed bail-out of transnationalfinancial institutions or a genuine EU financial stress test. Supervisory responsibilitiesremained entirely with individual countries and coordination problemswere managed through a combination of ad-hoc, discretionary cooperation andreliance on EU rules and procedures. It is not possible, however, to determinewhether this relatively satisfactory situation is due to the fact that ad-hoccoordination was fundamentally sufficient or because no complex case of crossborderbank failure occurred. © CEPR, CES, MSH, 2010.

Keywords: Banking crisis management in the EU, an early assessment; Concerns, about the ability to manage liquidity/solvency difficulties; Crisis prevention and supervisory system, MoU at national/EU level, in crisis; Europe, doing much better than expected, on the basis of existing arrangements; Internationalization of the EU banking sector; Money market tension, measured by the EURIBOR-OIS spread, ups/downs (search for similar items in EconPapers)
Date: 2012-09
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Journal Article: Banking crisis management in the EU: an early assessment (2010)
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